Should countries be paid in 'carbon credits' for preserving their forests? India, faced with an environmental crisis, certainly feels it should be financially rewarded for more than not cutting down trees, but also for any forestry conservation and expansion programmes.

But its demand that the carbon, sequestered by the forests that are not being cut down, can be cashed in the carbon market, has met with failure at the UN climate change talks in Bali this week.

Although UK environment secretary Hilary Benn has said the talks have agreed progress on how to avoid deforestation, the Indian delegation says the financial arrangements have not been decided.

The Indian delegation at Bali wanted to add "conservation" to "avoided deforestation" in the draft roadmap. When that point was not included in the draft that appeared on Tuesday morning, India objected. India's stand was made clear by environment and forests secretary, Meena Gupta, at Bali when she said: "We are not the only country that wants this. India is one of the few developing countries where the forest cover is going up, not down. We should not be penalised for that."

The next draft on fighting deforestation stated : "In the context of land use the role of conservation and enhancement of carbon stocks will be considered."

Indian government delegates described this as vindication of the country's position, though by the next morning's draft the word used had been "addressed" rather than "considered", a weaker word in UN parlance.

Forest and wildlife conservation in India has been the subject of fierce criticism over the past three years. With both deforestation and wildlife crime at their respective peaks, the government has been grappling for an answer.

The infrastructure of forest protection is abysmal with guards poorly paid, and lacking basic equipment and infrastructure. This year (2007-08), the government allocation to forest and wildlife conservation has been a mere 0.2% of its total annual budget. Obviously some earnings will therefore be welcome through carbon credits.

Some Indian NGOs do not agree with the government that India should be paid to conserve its forests. "This is like saying Saudi Arabia should be paid for all the oil it has underground," said Srinivas Krishnaswamy, climate and energy expert, at Greenpeace India.

But others leading environmentalists in India, think the government's claim is justified. "Our thrust is that protecting forests prevents climate change and that tropical forests should qualify for carbon credits, for storage and that when we move villages out of forests, we should be able to claim carbon credits for the sequestration that is bound to follow natural regeneration. Right now everything is being lapped up by monocultures and technological fixes," said Bittu Sahgal editor, of Sanctuary Asia magazine.

At present, forests store about 686 gigatonnes (GT) of carbon -- about 50% more than the atmosphere -- and are being cleared at an average rate of about 13m hectares per annum. This makes deforestation responsible for around a fifth of global green house gas emissions. The Stern Report suggests that tackling deforestation in the eight countries that account for 70% of the destruction shall cost between $5-10bn a year; a sum that few governments can afford.

Others have a contrary view. "Opening up forests to the market in one fell swoop shall have unpredictable effects on the functioning of the carbon market," explains Bill Hare Greenpeace campaigner and visiting professor at the Potsdam Institute for Climate Change Impact. "The sudden supply of credits could result in the price of carbon credits bottoming out."

"What happens if you sell forest credits on the market, and then destroy them five years later?" asked a member of the audience in one session.

The answers, it seems, are yet to be worked out.

Aditya Ghosh is special correspondent at the Hindustan Times newspaper in Mumbai